The article made an important mistake when it said that “It’s now between two European systems, the EF-2000 Typhoon and the JAS-39 Gripen.” While the Gripen may actually be the best option for India, the contenders are actually the EADS/ BAE/ Finmeccanica Eurofighter, and France’s Dassault Rafale, which have both been very active lately over Libya. Saab’s JAS-39NG Gripen was dropped from consideration, along with Russia’s thrust-vectoring MiG-29OVT/35D, Lockheed Martin’s F-16 Block 60+, and Boeing’s F/A-18E/F Super Hornet.

The author, Mr. “Machiavelli,” found it especially interesting that 18 planes will be supplied but the rest must be manufactured in India, and saw it as a shift that might make India a defense exporter.

Actually, it’s a different kind of shift. India’s state-owned defense firms, and a combination of political and cultural currents, have given it a strong “indigenization” mentality. This has often led to huge expenditures on failed programs epitomized by the “not invented here” mentality, followed by emergency off-the-shelf foreign buys of weapons that work. Lately, it has also led to some co-development and co-production programs. In the last few years, India’s SU-30MKIs, which are aerodynamically superior to any F-15 variant, are being built under a similar “order some, build the rest” contract. So are its BAE Hawk advanced trainer jets, and problems with Russian support programs led India to start-up a licensed engine plant for its MiG-29s.

India’s Su-30MKI

While its state-owned defense sector is still very much in need of reform, India is trying to develop private industry defense expertise. They’re doing it slowly, in fits and starts, which seems to be the Indian way of things. More to the point, they’re looking to use major foreign defense buys as a lever to do it. By requiring the equivalent of 30% industrial offset value on foreign orders over a given amount (and 50% for MMRCA), they hope to see major foreign firms partner with local Indian companies as sub-contractors for manufacturing and maintenance. Much of this mandated business will actually flow to state-owned defense firms, but some will also flow to private companies.

Is India setting up to be the next big global aerospace defense exporter? They’re certainly interested in pursuing exports, and as competition in places like Africa heats up between India and China, I expect India to be especially active there.

There are also some global trends giving that idea a boost. With the west more or less abandoning the lightweight fighter market in favor of mid-tier and top-tier offerings only, the future for new-buy fighters in the most-bought tier that F-5s and MiG 17-21s used to occupy becomes a competition between Pakistan & China’s JF-17 Thunder, South Korea’s KAI T/FA-50 Golden Eagle family, and India’s HAL Tejas. Their main competition will be used-aircraft selloffs from Europe and the USA, with possible input from Russia depending on the Yak-130’s development, and the MiG-29 family’s future and pricing.

The thing is, becoming an international defense exporter takes a lot more than just local manufacturing. The products have to be developed or co-developed, and emerge in an acceptable time frame as competitive offerings, priced at the right point. India has had serious trouble with timeframes, and its developed products are often below the global marketplace standard, so they’ll have to either drop prices hard, or improve in this area. International partnering within the countries buying your product must be a solid skill, given that so many countries have industrial offset policies like India’s. So far, Indian firms’ experience is mostly on the receiving end. Regional equipment support systems must be in place, and they must be congenial, affordable, and timely enough for customers. The Russians are especially terrible at this, and India has not developed that yet, outside some private players like Tata Motors. Then, too, geopolitical relationships always play a role, driven by which countries want you to be their friend. In this area, too, India is just getting started.

“…the deeper problem with the current two-step approach is… that it potentially permits a costly misallocation of defence resources that could over time subvert India’s larger national security. Simply put, a procurement process that does not include shadow prices in the first step of its evaluation is fundamentally flawed…. There is no such thing as ‘best’ technology in the abstract, especially where defence procurement is concerned. The pre-eminence of any war-fighting technology in the real world can be judged only against the constraints of price – and, particularly in regards to India, against additional variables of consequence… what economists call, ‘constrained maximization’…. The current Indian procedure of attempting to first select technology without reference to any other constraints leads inexorably, using an infamous American example, to purchasing a USD640 airplane toilet seat.”

Time will tell if the EUR 100+ million Eurofighter, or EUR 70-90 million Rafale, can meet India’s request for over 126 fighters within an acceptable budget, and with enough industrial benefits. Or if fiscal realities will force a political re-opening of the competition.

Meanwhile, if I was going to look for the next global arms competitor, I’d take a tip from the car industry’s experience with Hyundai, and look to South Korea. That country’s heavy armored vehicles, ships, and planes are quality items, with existing deals under their belts and solid global prospects. Their industries have already developed many of the skills I discussed above. As for me, I own a Samsung TV, monitor, washing machine, and fridge, and Hyundai was a finalist for my recent car buy. You?

In the dawning Asian Century, I’m looking to China and South Korea as the 2 defense exporters of consequence.